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Monthly Archives: June 2011




I just stumbled across this link:

In order to get married overseas, Australian citizens must have been issued a ‘Certificate of No Impediment from the Cth Government. The Howard Government refuses to issue such certificates to gay Australians wishing to enter same sex marriages overseas . The Gillard Government continues this policy.

My first thought on reading this was wondering whether you could sue the Government under administrative law (for losses caused for cancelling weddings etc and for a mandatory injunction). Unfortunately, it seems like CNIs aren’t issued under any Australian law, so you can’t simply sue the Cth under a prerogative writ. It is issued at the request of foreign governments, so I think it is an ordinary legal power that comes with legal personhood (like the power to enter into contracts etc). Because they’re refusing to give such a certificate, its not like you can sue them for defamation either.

Plus, because the Marriage Act denies recognition to foreign gay marriages, there is an argument that Australia’s consular officials are dutybound to not recognise the proposed gay marriages as  marriages either. I, naturally, disagree with that argument (if only for the reason that the Marriage Act is phrased in the past tense). I wonder if you could seek a declaration that this is the case.



Sometimes, you’ll hear it said that relations between Japanese employers and employees is different from that of non-Japanese companies. Japanese employees are loyal to the firm, and the firm is loyal to them in turn. Therefore, a Japanese employee will stay with the one employer from life to death, and the company will pay him a generous pension to thank him for his service. Often, you’ll hear racist sociologists tracing this to traditional feudal values (as though all modern values didn’t somehow evolve from feudal beliefs). But what’s surprising is that the Japanese didn’t always have this system. It dates from after the World War and it is beginning to end now.

In the 1930s and 1940s, Japan had a very orthodox capitalist system, in which employees regularly switched employers. The culture of one-employee-one-employer only arose when wartime planning measures came into effect and the Japanese discovered that they liked it.

Source: Tetsuji Okazaki and Masahiro Okuno-Fujiwara , ‘Historical Origins’ in The Japanese Economic System and its Historical Origins


In the post-war period pre-1990, Japan’s economy roared ahead in what was then known as the Japanese economic miracle. Whether boom or bust, the Japanese economy consistently returned GDP growth higher than the OECD average. Entire forests were destroyed to print the books, articles and newspapers writing how Japanese collectivism was the way to the future. Much of this was racist rubbish, propagated by sociologists (the poor racist cousin to the noble cultural anthropologist), about how the Japanese clung to ‘feudal’ beliefs centred around honour and a sense of community. The worker felt feudal ties to his employer; the employer reciprocated by loyalty to the worker.

The same could be said of the Japanese banking system. The keiretsu system involved one main bank sat at the centre of a corporate group to which it was the primary lender. The bank held shares in most of these companies and provided a financial monitoring system and served as a way to bailout subsidiaries in danger of failing.

The same again could be said of other Japanese corporate groups. Massively diversified conglomerates spanned everything electronics, plumbing and manufacturing. This allowed cross-fertilisation of ideas, contributed by employees who would spend their lives working for that one company.

As any economically-literate person can tell you, this edifice came crumbling down in the 1990s when the asset bubble popped and everything came tumbling down. It is easy to now scoff at the idea that collectivism (which, as any good Republican can tell you is code for socialism) could ever have been the future for America and the developed world, but those ideas had real currency.

What’s interesting is that even modern analyses show that these structures were beneficial during the good times. Reduced agency costs, monitoring costs etc allowed firms to overcome information asymmetry – particularly when a firm is collapsing and the incentive to hide information is particularly acute. Of course, these same keiretsu structures were the cause of the ‘Lost Decade’ of economic growth from 1990 to at least 2003 (yes, that is two decades). So, in a perverse way, those people in the 1980s were right.

In a way, this is not surprising. Orthodox economic theory, originating with the Coase theory, says that a firm will choose to in-source a particular activity rather than outsourcing it to another firm if transaction costs are too high. This is simply another application of that principle in an unusual context. The keiretsu structure minimises transaction costs (monitoring costs, information asymmetry etc) during the good times but it increases transaction costs in bad times due to the perverse incentives it creates.

Those Japanese firms adopting the keiretsu model misjudged its economic effects, as firms often do. The capitalist model encourages firms to take such risks, knowing that if they fail they will be held accountable by the market. The error in Japan was that government intervention propped up these keiretsu firms during the boom years and also during the financial crisis rather than permitting them the discipline of the market from correcting their misjudgment.

So there. The free market beats collectivism once again.

As the Economist notes, other countries have defaulted in the past (Argentina, Russia, Indonesia) and then only suffered a temporary growth penalty.

So perhaps in some cases it is worthwhile to default on your debt now, at the expense of being locked out of capital markets for a few years, if you can avoid stringent budget cuts.

As I have argued, there is a disconnect in this debate about short run and long run effects of cutting budgets during a recession. It will stimulate business growth, but only in the medium or long run, but in the short run it has a negative stimulatory effect. It reduces government demand whilst private sector demand remains weak.

So defaulting is a good idea, if you can guarantee that the government is willing to make strong structural changes to your budget once private sector demand starts flowing again. The problem is that this guarantee is almost never available.

So, if Greece defaults now to avoid its budget cuts, is it realistic that the Greek government will make these necessary cuts in two or three years time? If it doesn’t, then the same structural budget problems remain with the Greek economy. No lender would lend to Greece, if it has defaulted and has not fixed the problems that lead to the default in the first place.

I think the best solution, which the Economist has been advocating for some time, is to restructure Greece’s debt by long-dating some of its current debt obligations. The debtors need to take a small haircut.

I would add that Greece needs to be moved out of the common currency. The drachma needs to be reinstituted as the Greek currency so that it can devalue, giving the Greek central bank the power to adjust is interest rates accordingly.

Barry O’Farrell promised, before the last election, to examine a recall election process for NSW. That way, incompetent governments could be removed from government.

The only precedents that I’m aware of are California and British Columbia. In CA, the recall election sits within a wider direct democracy constitutional structure which simply does not work. British Columbia’s recall provisions have never been exercised.

The choice of George Williams is an interesting choice. He tends not to be as involved in substantive constitutional law as with philosophy. Anne Twomey, the leading expert on State Constitutional law and who has studied the recall issue, would be a better pick if you wanted a truly expert panel. On the other hand, I doubt Twomey would support a recall election procedure. I wonder how serious BOF is about this recall procedure.

The crucial issue is how many petitions are required to trigger the recall election. If the number is too low, it will make difficult issues impossible to solve. Governments will become even more poll-driven, incompetent and unable to make difficult decisions than they are now. California is proof of that. The British Columbia solution was to make the number of petitions required very high. Thus, it provides an incentive not to be incompetent without requiring any actual recall elections.

The other difficult issue is the potential for abuse. If about 20% of the population are rusted-on supporters of one party or the other, then a party could easily get a very large number of petitions (no matter how high the barrier is) and force a recall election.

A question Barry O’Farrell should be asking himself is this. Could he push through his changes to the public sector without facing a recall election? The unions could easily gain enough petitions to overthrow him. Could he then win an election fought primarily on such a controversial issue? Perhaps, but it would be quite risky for him. It would be tightly fought. He would no doubt  lose his massive majority.

Whilst I’m no wimpy vegetarian, but the cruel treatment of quasi-intelligent animals is wrong, especially if unnecessary. So, I broadly agree with the policy outcome being pursued by the Gillard Government. Let’s stop the live export trade if it leads to these sorts of animal welfare issues.

But designing this policy is a difficult challenge because we wouldn’t want to hurt Australian farmers who are already hurting from droughts and flooding rains.

If we place an instant ban on live exports to Indonesia, where will these cows (which are bred especially for live export) be sent? Shall we flood other live export markets like the Middle East and drop prices?

I don’t see why we couldn’t  place an instant ban, with an exemption for abattoirs that do follow Australian level standards. To monitor those abattoirs, we could simply have AFP or Department of Health officials sent to certified abattoirs who would ensure that cattle are slaughtered ethically. They could be paid for by the Australian meat industry body which is already responsible for such monitoring.

In the short run, no doubt the Indonesian abattoirs would be falling over each other to be amongst the few abattoirs which meet Australian ethical standards. But in the long run, would any ban be effective to reduce unethical animal slaughter?

The live export trade is, I assume, a competitive market where Australian farmers compete against those from the US and from other SE Asian countries. An Australian government ban is, effectively, like a cartel which aggregates the market power of individual Australian farmers. But even though that cartel has market power in the short run, such market power is due solely to its large market share. That market share would be quickly eroded by the other competitors (if the other farmers do not lobby as hard for ethical animal treatment).

But if the Australian government can secure some exclusive dealing arrangement with certain abattoirs, then the net effect will be to stabilise Australia’s market share whilst ensuring that our exports are slaughtered consistently with animal welfare. There are several effective barriers to this. Firstly, if the cost of slaughtering animals ethically is materially higher than slaughtering them unethically, then the tied-abattoirs will be less competitive than unethical abattoirs and Australia’s market share will drop. The second is if Indonesian competition law bans exclusive dealing (as Australian law does, in s 47 of the former Trade Practices Act). The third is if the certified abattoirs, having a tied arrangement, lose their incentives to keep up standards because they have guaranteed supply from Australian competitors.

The better solution would be to certify certain abattoirs and compensate them for adopting ethical slaughter methods. That way, Australian farmers do not restrict themselves to a few abattoirs. Such a restriction is anti-competitive and bad for the market in the long run. Instead, the market remains competitive and neither farmers nor abattoirs will be hurt. A certification process would only be useful in the short run.

So the live export ban, if the US and other major live exporters do not come on board, may have some effect because it acts as a cartel but it is not guaranteed to be effective in all instances. A national-level ban will be far less effective than an international ban which will require either support of the US (and whatever other major exporters there are) or a ban enforced by the international agency responsible for international health or slaughter standards.

What a brilliant article, it contains some brilliant one liners:

Everyone remembers Cameron’s opening salvo against Blair in December 2005: “You were the future once.” An “anologue PM in a digital age” was his jibe against Brown. In 1999 Blair punctured William Hague as “Billy Bandwagon”, a man with “good jokes, bad judgment”. After Harold Macmillan‘s bloodiest reshuffle in 1962, future Liberal leader Jeremy Thorpe quipped that he had “laid down his friends for his life”. Like Vince Cable’s “Stalin to Mr Bean” crack at Brown during PMQs in 2007, such soundbite verdicts often stick. They always did.

And its so good to read a mainstream media article where somebody understands constitutional principles. Hurrah.







Someone commented on one of my old posts, where I described factionalism within the Greens. I don’t know if she’s right (one should always be cautious of any one who posts comments randomly on as obscure  blog as this) but its an interesting idea.

What a load of uniformed crap. Sarah Hansen-Young is no friend of Lee Rhiannon’s. Hansen-Young is far more conservative than the older Rhiannon or even Milne. The NSW Greens hate Hansen Young and Rhiannon spearheads much of the campaign against the younger Sentor. Stranger thing is Hansen-Young is closer to Brown than just about anyone. Yes the Greens have factions but you have totally missed who is with who.

Of course, my post was actually terribly well-informed. (See my counter-comment for a list of sources). But it would be interesting if everything the mainstream media, and the Labor Party and the Liberal Party thought about factions within the Greens was wrong.

I can’t see a single shred of evidence that SHY is conservative myself. Maybe she means that SHY is a totally fake politician, who pretends to be young to get up the youth vote. And who loves shallow mediabites, but rarely says anything of substance.

More research for my interview. This is actually based on a blog post I had half-written 2 years ago but never got around to posting.

  • Childcare
    • I think reform of childcare will be one of the more important microeconomic reforms our generation can make. It will have more productivity gains than introducing labour market deregulation or any other policy I can think of
    • When women began entering the workforce, economies right around the world got a massive boost to their economic growth due to a flood of new and intelligent workers. The productivity gains were enormous, from transferring smart women into jobs that made use of their intelligence.
    • Now, women’s pay is still less than those of comparable men’s jobs. Part of this is due to good old fashioned discrimination – pay levels at entry-level graduate jobs are not equal – but a big part is that women are forced to choose between being carers and careers.
    • Some statistics:
      • 40% of professional women in Switzerland are childless
      • 93% of MBAs wanted to return to work after leaving work to raise children, but only 40% returned to full time jobs of any kind.
    • Paid maternity leave is one solution, and one which Tony Abbott proposed (6 months, compulsory); e.g. Austria gives up to 3 years paid maternity leave
      • But it is very expensive and I think it may not work. You are still forcing businesses to go without their employees for three years. Who makes hiring decisions three years in advance? We all recognise that skills atrophy during unemployment, which is essentially what paid maternity leave is
      • It actively discourages firms from hiring women at the graduate entry level, knowing that in 5 years time, she has a right for 3 years of paid maternity
      • It’s a blanket solution that cannot be adjusted for particular industry conditions
    • I think childcare and flexi-time is a more tailored solution, perhaps in combination with maternity leave
      • There are problems with policy implementation. For example, government subsidies for child care centres caused all the distortions so well-described by economic theory.
        • Just as subsidies for retirement villages created a nirvana for A Current Affair and Today Tonight, low quality child care centres appeared everywhere.
        • Those child care centres weren’t located in areas where they were needed – some childcare centres competed in the same areas; other areas had no child care centres. And many of these centres were badly run- just look at ABC learning.
        • Evidence shows that exposure to low-quality child care is bad for children, but they can thrive in exposure to high quality childcare.
      • It may be that state intervention is not required. Grandparents may be the solution, as they are in many Asian families
      • Flexi-time is a buzzword, and one that will be implemented by firms with pressure from employees. But there are some green shoots, like ‘legal directors’ as an alternative pathway to partnership in law firms.
        • Other innovative solutions, like having shorter semester breaks for schools and having longer school hours instead, as many US Charter Schools do
    • Another key goal is to remove the stigma from motherhood. If a woman takes time off work for children or wants flexitime, people will think she is non-career orientated. I think a key solution is to introduce paid paternity leave, with even stronger financial incentives for husbands to work.
      • It makes economic sense. In some cases, the mother may be more competent than the husband career-wise. It should be him that undergoes the skill atrophy associated with SR unemployment. But this isn’t happening because of cultural barriers
      • Having non-transferable parental leave for fathers has been shown to work in Nordic countries, but then again, so have high taxes
    • There are other benefits to equal participation. Some argue women are inherently better than men at some tasks, like communication whilst men are better entrepreneurs. If that is true and not an over-generalisation, then having men and women in your economy is a form of risk diversification. If an event, like the GFC, disproportionately affects men then you have women there to keep the economy growing strong (and vice versa – men provide upwards growth).

Kiefel J has received the highest accolade in the Order of Australia, the AC. Now only Bell J lacks an AC amongst the justices of the High Court. That isn’t too strange, given that there appears to be a timelag before Justices are awarded ACs.

Kiefel J’s honour is especially honourable as she is the only AC recipient this year. Which is odd that the SMH didn’t cover the story, whilst covering constitutional law academic George Williams’ AO.

  • French CJ appointed 2008, awarded AC 2010 [2 years]
  • Gummow J appointed 1995, awarded AC 1997 [2 years]
  • Hayne J appointed 1997, awarded AC 2002 [5 years]
    • Although this seems like a long time, it’s not as though Hayne ever wrote any separate judgments. Maybe the committee simply wasn’t aware he was appointed to the High Court.
  • Heydon J appointed 2003, awarded AC 2004 [1 year]
  • Crennan J appointed 2005, awarded AC 2008 [3 years]
  • Kiefel J appointed 2007, awarded AC 2011 [4 years]
  • Bell J appointed 2009, awarded AC ? [> 2 years]
Amongst recent former justices:
  • Gleeson CJ was an AC (1992) prior to becoming CJ of Australia (1998) possibly because he was CJ of NSW (1988)
  • Callinan J, appointed 1998, AC 2003 [5 years]
  • Kirby was an AC whilst he was President of the Court of Appeal
  • McHugh J, 1989; 1989 [0 years]
  • Gaudron J refused the award in 1988 when all the serving justices were offered the AC
At one point, it was customary for all justices to be knighted. Since it is no longer customary for Australians to be given knighthoods, it is no longer customary for High Court justices to be knighted either.
Obviously, the Order of Australia was set up to circumvent the British honours system, including knighthoods, but there is no reason in principle why an Australian knighthood cannot be granted. Indeed, Fraser created a new level of the Order of Australia – Knight (or Dame) of the Order of Australia (AK, AD) which was abolished by Hawke due to its controversial nature.
It would certainly be interesting to see what would happen if the Prime Minister advised the Governor-General to create an Australian knighthood, so one might be invested Sir Malcolm Fraser of Australia (instead of Sir Malcolm Fraser of the UK). The theory is long and complicated, but in my opinion there is no legal reason why it cannot be done. The Australia Acts intend that the Cth and States between them shall have every legislative power that Imperial Parliament once had (Port MacDonnell). It is well-recognised that the prerogative powers have followed the legislative powers in their distribution.